LOANS AND ALLOWANCE FOR LOAN LOSSES | 4. LOANS AND ALLOWANCE FOR LOAN LOSSES Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at September 30, 2019 and December 31, 2018 (dollars in thousands): September 30, 2019 December 31, 2018 Construction and Land Development $ 1,201,149 $ 1,194,821 Commercial Real Estate - Owner Occupied 1,979,052 1,337,345 Commercial Real Estate - Non-Owner Occupied 3,198,580 2,467,410 Multifamily Real Estate 659,946 548,231 Commercial & Industrial 2,058,133 1,317,135 Residential 1-4 Family - Commercial 721,185 640,419 Residential 1-4 Family - Consumer 913,245 673,909 Auto 328,456 301,943 HELOC 660,963 613,383 Consumer 386,848 379,694 Other Commercial 199,440 241,917 Total loans held for investment, net (1) $ 12,306,997 $ 9,716,207 (1) Loans, as presented, are net of deferred fees and costs totaling $8.1 million and $5.1 million as of September 30, 2019 and December 31, 2018, respectively. The following table shows the aging of the Company’s loan portfolio, by segment, at September 30, 2019 (dollars in thousands): Greater than 30-59 Days 60-89 Days 90 Days and Past Due Past Due still Accruing PCI Nonaccrual Current Total Loans Construction and Land Development $ 1,062 $ 351 $ 171 $ 8,387 $ 7,785 $ 1,183,393 $ 1,201,149 Commercial Real Estate - Owner Occupied 4,977 — 2,571 27,817 5,684 1,938,003 1,979,052 Commercial Real Estate - Non-Owner Occupied 5,757 1,878 36 17,285 381 3,173,243 3,198,580 Multifamily Real Estate 107 164 1,212 93 — 658,370 659,946 Commercial & Industrial 2,079 1,946 265 3,262 1,585 2,048,996 2,058,133 Residential 1-4 Family - Commercial 1,842 3,081 916 12,237 3,879 699,230 721,185 Residential 1-4 Family - Consumer 1,527 5,182 3,815 14,977 8,292 879,452 913,245 Auto 1,787 407 183 7 604 325,468 328,456 HELOC 4,965 1,747 1,674 4,275 1,641 646,661 660,963 Consumer 2,000 1,666 1,163 682 84 381,253 386,848 Other Commercial 579 9 30 713 97 198,012 199,440 Total loans held for investment $ 26,682 $ 16,431 $ 12,036 $ 89,735 $ 30,032 $ 12,132,081 $ 12,306,997 The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2018 (dollars in thousands): Greater than 30-59 Days 60-89 Days 90 Days and Past Due Past Due still Accruing PCI Nonaccrual Current Total Loans Construction and Land Development $ 759 $ 6 $ 180 $ 8,654 $ 8,018 $ 1,177,204 $ 1,194,821 Commercial Real Estate - Owner Occupied 8,755 1,142 3,193 25,644 3,636 1,294,975 1,337,345 Commercial Real Estate - Non-Owner Occupied 338 41 — 17,335 1,789 2,447,907 2,467,410 Multifamily Real Estate — 146 — 88 — 547,997 548,231 Commercial & Industrial 3,353 389 132 2,156 1,524 1,309,581 1,317,135 Residential 1-4 Family - Commercial 6,619 1,577 1,409 13,601 2,481 614,732 640,419 Residential 1-4 Family - Consumer 12,049 5,143 2,437 16,872 7,276 630,132 673,909 Auto 3,320 403 195 7 576 297,442 301,943 HELOC 4,611 1,644 440 5,115 1,518 600,055 613,383 Consumer 1,504 1,096 870 32 135 376,057 379,694 Other Commercial 126 — — 717 — 241,074 241,917 Total loans held for investment $ 41,434 $ 11,587 $ 8,856 $ 90,221 $ 26,953 $ 9,537,156 $ 9,716,207 The following table shows the PCI loan portfolios, by segment and their delinquency status, at September 30, 2019 (dollars in thousands): 30-89 Days Greater than Past Due 90 Days Current Total Construction and Land Development $ 126 $ 399 $ 7,862 $ 8,387 Commercial Real Estate - Owner Occupied 526 3,262 24,029 27,817 Commercial Real Estate - Non-Owner Occupied 137 980 16,168 17,285 Multifamily Real Estate — — 93 93 Commercial & Industrial — 1,043 2,219 3,262 Residential 1-4 Family - Commercial 421 479 11,337 12,237 Residential 1-4 Family - Consumer 844 1,912 12,221 14,977 Auto — — 7 7 HELOC 208 287 3,780 4,275 Consumer 4 15 663 682 Other Commercial — — 713 713 Total $ 2,266 $ 8,377 $ 79,092 $ 89,735 The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2018 (dollars in thousands): 30-89 Days Greater than Past Due 90 Days Current Total Construction and Land Development $ 108 $ 1,424 $ 7,122 $ 8,654 Commercial Real Estate - Owner Occupied 658 4,281 20,705 25,644 Commercial Real Estate - Non-Owner Occupied 61 1,810 15,464 17,335 Multifamily Real Estate — — 88 88 Commercial & Industrial 47 1,092 1,017 2,156 Residential 1-4 Family - Commercial 871 3,454 9,276 13,601 Residential 1-4 Family - Consumer 1,959 2,422 12,491 16,872 Auto — — 7 7 HELOC 498 252 4,365 5,115 Consumer 5 9 18 32 Other Commercial 57 — 660 717 Total $ 4,264 $ 14,744 $ 71,213 $ 90,221 The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans, by segment at September 30, 2019 and December 31, 2018 (dollars in thousands): September 30, 2019 December 31, 2018 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance Loans without a specific allowance Construction and Land Development $ 9,776 $ 14,131 $ — $ 10,290 $ 12,038 $ — Commercial Real Estate - Owner Occupied 9,362 9,966 — 8,386 9,067 — Commercial Real Estate - Non-Owner Occupied 2,028 2,578 — 6,578 6,929 — Multifamily Real Estate 1,212 1,212 — — — — Commercial & Industrial 2,205 2,221 — 3,059 3,251 — Residential 1-4 Family - Commercial 4,330 4,598 — 3,378 3,439 — Residential 1-4 Family - Consumer 9,432 10,006 — 9,642 10,317 — HELOC 864 867 — 1,150 1,269 — Consumer — — — 30 102 — Other Commercial — — — 478 478 — Total impaired loans without a specific allowance $ 39,209 $ 45,579 $ — $ 42,991 $ 46,890 $ — Loans with a specific allowance Construction and Land Development $ 829 $ 868 $ 78 $ 372 $ 491 $ 63 Commercial Real Estate - Owner Occupied 3,570 3,685 234 4,304 4,437 359 Commercial Real Estate - Non-Owner Occupied 336 384 3 391 391 1 Commercial & Industrial 1,783 1,810 866 1,183 1,442 752 Residential 1-4 Family - Commercial 1,763 1,807 170 2,120 2,152 89 Residential 1-4 Family - Consumer 10,047 10,631 805 6,389 6,645 470 Auto 605 905 239 576 830 231 HELOC 1,177 1,312 262 724 807 188 Consumer 180 345 50 178 467 64 Other Commercial 565 569 27 — — — Total impaired loans with a specific allowance $ 20,855 $ 22,316 $ 2,734 $ 16,237 $ 17,662 $ 2,217 Total impaired loans $ 60,064 $ 67,895 $ 2,734 $ 59,228 $ 64,552 $ 2,217 The following tables show the average recorded investment and interest income recognized for the Company’s impaired loans, excluding PCI loans, by segment for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands): Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Interest Interest Average Income Average Income Investment Recognized Investment Recognized Construction and Land Development $ 13,581 $ 40 $ 13,601 $ 351 Commercial Real Estate - Owner Occupied 13,301 85 13,436 339 Commercial Real Estate - Non-Owner Occupied 2,748 26 3,543 82 Multifamily Real Estate 1,217 15 1,234 46 Commercial & Industrial 3,986 41 4,046 129 Residential 1-4 Family - Commercial 6,334 41 6,521 125 Residential 1-4 Family - Consumer 19,802 75 20,007 264 Auto 691 — 781 9 HELOC 2,125 5 2,242 31 Consumer 184 2 192 5 Other Commercial 570 7 579 21 Total impaired loans $ 64,539 $ 337 $ 66,182 $ 1,402 Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 Interest Interest Average Income Average Income Investment Recognized Investment Recognized Construction and Land Development $ 12,481 $ 63 $ 12,083 $ 203 Commercial Real Estate - Owner Occupied 11,873 102 11,966 322 Commercial Real Estate - Non-Owner Occupied 6,932 57 7,141 175 Commercial & Industrial 2,607 15 2,713 57 Residential 1-4 Family - Commercial 4,233 29 4,322 105 Residential 1-4 Family - Consumer 16,570 48 16,693 162 Auto 609 — 685 12 HELOC 1,800 4 1,871 14 Consumer 180 — 218 — Other Commercial 509 7 538 22 Total impaired loans $ 57,794 $ 325 $ 58,230 $ 1,072 The Company considers TDRs to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables. For the three and nine months ended September 30, 2019, the recorded investment in TDRs prior to modifications was not materially impacted by the modifications. The following table provides a summary, by segment, of TDRs that continue to accrue interest under the terms of the applicable restructuring agreement, which are considered to be performing, and TDRs that have been placed on nonaccrual status, which are considered to be nonperforming, as of September 30, 2019 and December 31, 2018 (dollars in thousands): September 30, 2019 December 31, 2018 No. of Recorded Outstanding No. of Recorded Outstanding Loans Investment Commitment Loans Investment Commitment Performing Construction and Land Development 4 $ 1,130 $ — 5 $ 2,496 $ — Commercial Real Estate - Owner Occupied 6 2,228 — 8 2,783 — Commercial Real Estate - Non-Owner Occupied 1 1,089 — 4 4,438 — Commercial & Industrial 5 1,123 — 4 978 — Residential 1-4 Family - Commercial 5 293 — 8 1,075 — Residential 1-4 Family - Consumer 64 8,738 — 52 6,882 — HELOC 2 56 — 2 58 — Consumer 4 31 — 1 13 — Other Commercial 1 468 — 1 478 — Total performing 92 $ 15,156 $ — 85 $ 19,201 $ — Nonperforming Construction and Land Development — $ — $ — 2 $ 3,474 $ — Commercial Real Estate - Owner Occupied 2 180 — 2 198 — Commercial & Industrial 1 56 — 6 461 — Residential 1-4 Family - Commercial — — — 1 60 — Residential 1-4 Family - Consumer 18 3,288 — 15 3,135 — HELOC 2 58 — 2 62 — Consumer — — — 1 7 — Total nonperforming 23 $ 3,582 $ — 29 $ 7,397 $ — Total performing and nonperforming 115 $ 18,738 $ — 114 $ 26,598 $ — The Company considers a default of a TDR to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three and nine months ended September 30, 2019 and 2018, the Company did not have any material loans that went into default that had been restructured in the twelve-month period prior to the time of default. The following table shows, by segment and modification type, TDRs that occurred during the three and nine months ended September 30, 2019 (dollars in thousands): All Restructurings Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Recorded Recorded No. of Investment at No. of Investment at Loans Period End Loans Period End Modified to interest only, at a market rate Total interest only at market rate of interest — $ — — $ — Term modification, at a market rate Commercial & Industrial 1 $ 376 1 $ 376 Residential 1-4 Family - Commercial — — 1 73 Residential 1-4 Family - Consumer 1 461 4 761 Consumer 2 18 3 26 Total loan term extended at a market rate 4 $ 855 9 $ 1,236 Term modification, below market rate Construction and Land Development 2 $ 164 2 $ 164 Residential 1-4 Family - Consumer 5 883 17 2,211 Consumer — — 1 5 Total loan term extended at a below market rate 7 $ 1,047 20 $ 2,380 Total 11 $ 1,902 29 $ 3,616 The following table shows, by segment and modification type, TDRs that occurred during the three and nine months ended September 30, 2018 (dollars in thousands): All Restructurings Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Recorded Recorded No. of Investment at No. of Investment at Loans Period End Loans Period End Modified to interest only, at a market rate Total interest only at market rate of interest — $ — — $ — Term modification, at a market rate Construction and Land Development 2 $ 3,545 4 $ 4,809 Commercial Real Estate - Owner Occupied — — 5 1,371 Commercial Real Estate - Non-Owner Occupied 1 1,089 1 1,089 Commercial & Industrial 2 278 3 339 Residential 1-4 Family - Commercial — — 1 71 Residential 1-4 Family - Consumer — — 6 759 Consumer 1 14 1 14 Total loan term extended at a market rate 6 $ 4,926 21 $ 8,452 Term modification, below market rate Commercial Real Estate - Non-Owner Occupied 1 $ 2,782 1 $ 2,782 Residential 1-4 Family - Consumer 9 1,598 16 2,612 HELOC 2 46 2 46 Total loan term extended at a below market rate 12 $ 4,426 19 $ 5,440 Total 18 $ 9,352 40 $ 13,892 The following tables show the ALL activity by segment for the nine months ended September 30, 2019 and 2018. The tables below include the provision for loan losses. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands): Nine Months Ended September 30, 2019 Allowance for loan losses Balance, Recoveries Loans Provision Balance, beginning of credited to charged charged to end of the year allowance off operations period Construction and Land Development $ 6,803 $ 269 $ (4,028) $ 2,863 $ 5,907 Commercial Real Estate - Owner Occupied 4,023 118 (483) 361 4,019 Commercial Real Estate - Non-Owner Occupied 8,865 95 (270) 996 9,686 Multifamily Real Estate 649 85 — 46 780 Commercial & Industrial 7,636 936 (2,162) 2,739 9,149 Residential 1-4 Family - Commercial 1,692 244 (397) 50 1,589 Residential 1-4 Family - Consumer 1,492 256 (108) 158 1,798 Auto 1,443 452 (957) 614 1,552 HELOC 1,297 589 (570) (179) 1,137 Consumer and all other (1) 7,145 1,896 (12,215) 11,377 8,203 Total $ 41,045 $ 4,940 $ (21,190) $ 19,025 $ 43,820 (1) Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes. Nine Months Ended September 30, 2018 Allowance for loan losses Balance, Recoveries Loans Provision Balance, beginning of credited to charged charged to end of the year allowance off operations period Construction and Land Development $ 9,709 $ 400 $ (703) $ (1,218) $ 8,188 Commercial Real Estate - Owner Occupied 2,931 488 (174) (300) 2,945 Commercial Real Estate - Non-Owner Occupied 7,544 82 (94) 806 8,338 Multifamily Real Estate 1,092 5 — 525 1,622 Commercial & Industrial 4,552 413 (692) 2,429 6,702 Residential 1-4 Family - Commercial 4,437 306 (137) (2,512) 2,094 Residential 1-4 Family - Consumer 1,524 235 (640) 770 1,889 Auto 975 365 (759) 760 1,341 HELOC 1,360 554 (488) (70) 1,356 Consumer and all other (1) 4,084 1,234 (6,412) 7,913 6,819 Total $ 38,208 $ 4,082 $ (10,099) $ 9,103 $ 41,294 (1) Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes. The following tables show the loan and ALL balances based on impairment methodology by segment as of September 30, 2019 and December 31, 2018 (dollars in thousands): September 30, 2019 Loans individually Loans collectively Loans acquired with evaluated for evaluated for deteriorated credit impairment impairment quality Total Loans ALL Loans ALL Loans ALL Loans ALL Construction and Land Development $ 10,605 $ 78 $ 1,182,157 $ 5,829 $ 8,387 $ — $ 1,201,149 $ 5,907 Commercial Real Estate - Owner Occupied 12,932 234 1,938,303 3,785 27,817 — 1,979,052 4,019 Commercial Real Estate - Non-Owner Occupied 2,364 3 3,178,931 9,683 17,285 — 3,198,580 9,686 Multifamily Real Estate 1,212 — 658,641 780 93 — 659,946 780 Commercial & Industrial 3,988 866 2,050,883 8,066 3,262 217 2,058,133 9,149 Residential 1-4 Family - Commercial 6,093 170 702,855 1,419 12,237 — 721,185 1,589 Residential 1-4 Family - Consumer 19,479 805 878,789 993 14,977 — 913,245 1,798 Auto 605 239 327,844 1,313 7 — 328,456 1,552 HELOC 2,041 262 654,647 875 4,275 — 660,963 1,137 Consumer and all other (1) 745 77 584,148 8,126 1,395 — 586,288 8,203 Total loans held for investment, net $ 60,064 $ 2,734 $ 12,157,198 $ 40,869 $ 89,735 $ 217 $ 12,306,997 $ 43,820 (1) Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes. December 31, 2018 Loans individually Loans collectively Loans acquired with evaluated for evaluated for deteriorated credit impairment impairment quality Total Loans ALL Loans ALL Loans ALL Loans ALL Construction and Land Development $ 10,662 $ 63 $ 1,175,505 $ 6,740 $ 8,654 $ — $ 1,194,821 $ 6,803 Commercial Real Estate - Owner Occupied 12,690 359 1,299,011 3,664 25,644 — 1,337,345 4,023 Commercial Real Estate - Non-Owner Occupied 6,969 1 2,443,106 8,864 17,335 — 2,467,410 8,865 Multifamily Real Estate — — 548,143 649 88 — 548,231 649 Commercial & Industrial 4,242 752 1,310,737 6,884 2,156 — 1,317,135 7,636 Residential 1-4 Family - Commercial 5,498 89 621,320 1,603 13,601 — 640,419 1,692 Residential 1-4 Family - Consumer 16,031 470 641,006 1,022 16,872 — 673,909 1,492 Auto 576 231 301,360 1,212 7 — 301,943 1,443 HELOC 1,874 188 606,394 1,109 5,115 — 613,383 1,297 Consumer and all other (1) 686 64 620,176 7,081 749 — 621,611 7,145 Total loans held for investment, net $ 59,228 $ 2,217 $ 9,566,758 $ 38,828 $ 90,221 $ — $ 9,716,207 $ 41,045 (1) Consumer and Other Commercial are grouped together as Consumer and all other for reporting purposes. The Company uses a risk rating system and past due status as the primary credit quality indicators for the loan categories. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the ALL; on those loans without a risk rating, the Company uses past due status to determine risk level. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows: Pass is determined by the following criteria: ● Risk rated 0 loans have little or no risk and are with General Obligation Municipal Borrowers; ● Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents; ● Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety; ● Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment; ● Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan; or ● Loans that are not risk rated but that are 0 to 29 days past due. Watch & Special Mention is determined by the following criteria: ● Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay; ● Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position; or ● Loans that are not risk rated but that are 30 to 89 days past due. Substandard is determined by the following criteria: ● Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected; or ● Loans that are not risk rated but that are 90 to 149 days past due. Doubtful is determined by the following criteria: ● Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; ● Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted; or ● Loans that are not risk rated but that are over 149 days past due. The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of September 30, 2019 (dollars in thousands): Pass Watch & Special Mention Substandard Doubtful Total Construction and Land Development $ 1,148,732 $ 33,136 $ 10,894 $ — $ 1,192,762 Commercial Real Estate - Owner Occupied 1,850,909 78,451 21,730 145 1,951,235 Commercial Real Estate - Non-Owner Occupied 3,124,018 54,884 2,297 96 3,181,295 Multifamily Real Estate 645,193 13,448 1,212 — 659,853 Commercial & Industrial 1,949,546 99,337 5,988 — 2,054,871 Residential 1-4 Family - Commercial 679,023 22,772 7,153 — 708,948 Residential 1-4 Family - Consumer 871,391 4,584 22,293 — 898,268 Auto 324,396 1,990 2,063 — 328,449 HELOC 644,019 6,529 6,140 — 656,688 Consumer 384,744 1,182 240 — 386,166 Other Commercial 196,511 2,057 159 — 198,727 Total $ 11,818,482 $ 318,370 $ 80,169 $ 241 $ 12,217,262 The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of December 31, 2018 (dollars in thousands): Pass Watch & Special Mention Substandard Doubtful Total Construction and Land Development $ 1,130,577 $ 43,894 $ 11,696 $ — $ 1,186,167 Commercial Real Estate - Owner Occupied 1,231,422 50,939 29,340 — 1,311,701 Commercial Real Estate - Non-Owner Occupied 2,425,500 17,648 6,927 — 2,450,075 Multifamily Real Estate 537,572 10,571 — — 548,143 Commercial & Industrial 1,273,549 34,864 6,566 — 1,314,979 Residential 1-4 Family - Commercial 606,955 14,876 4,987 — 626,818 Residential 1-4 Family - Consumer 624,346 17,065 15,626 — 657,037 Auto 296,907 3,590 1,439 — 301,936 HELOC 598,444 6,316 3,508 — 608,268 Consumer 378,873 547 242 — 379,662 Other Commercial 239,857 864 479 — 241,200 Total $ 9,344,002 $ 201,174 $ 80,810 $ — $ 9,625,986 The following table shows the recorded investment in only PCI loans by segment with their related risk level as of September 30, 2019 (dollars in thousands): Pass Watch & Special Mention Substandard Doubtful Total Construction and Land Development $ 1,233 $ 3,993 $ 3,161 $ — $ 8,387 Commercial Real Estate - Owner Occupied 8,273 10,845 8,699 — 27,817 Commercial Real Estate - Non-Owner Occupied 3,855 9,533 3,897 — 17,285 Multifamily Real Estate — 93 — — 93 Commercial & Industrial 115 57 3,090 — 3,262 Residential 1-4 Family - Commercial 6,490 2,780 2,967 — 12,237 Residential 1-4 Family - Consumer 10,074 233 4,670 — 14,977 Auto 3 — 4 — 7 HELOC 3,092 607 576 — 4,275 Consumer 660 4 18 — 682 Other Commercial 122 591 — — 713 Total $ 33,917 $ 28,736 $ 27,082 $ — $ 89,735 The following table shows the recorded investment in only PCI loans by segment with their related risk level as of December 31, 2018 (dollars in thousands): Pass Watch & Special Mention Substandard Doubtful Total Construction and Land Development $ 1,835 $ 1,308 $ 5,511 $ — $ 8,654 Commercial Real Estate - Owner Occupied 8,347 6,685 10,612 — 25,644 Commercial Real Estate - Non-Owner Occupied 4,789 7,992 4,554 — 17,335 Multifamily Real Estate — 88 — — 88 Commercial & Industrial 762 134 1,260 — 2,156 Residential 1-4 Family - Commercial 6,476 2,771 4,354 — 13,601 Residential 1-4 Family - Consumer 9,930 1,030 5,912 — 16,872 Auto 7 — — — 7 HELOC 3,438 1,031 646 — 5,115 Consumer 17 — 15 — 32 Other Commercial 57 660 — — 717 Total $ 35,658 $ 21,699 $ 32,864 $ — $ 90,221 Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows. The following shows changes in the accretable yield for loans accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality, For the Nine Months Ended September 30, 2019 2018 Balance at beginning of period $ 31,201 $ 14,563 Additions 2,432 12,225 Accretion (9,830) (6,666) Reclass of nonaccretable difference due to improvement in expected cash flows 1,372 360 Measurement period adjustment 2,629 2,981 Other, net (1) 5,083 1,845 Balance at end of period $ 32,887 $ 25,308 (1) This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate PCI loans, and discounted payoffs that occurred in the quarter. The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality Receivables – Nonrefundable Fees and Other Costs |